In a significant move aimed at simplifying tax compliance and promoting transparency in professional incomes, the Central Board of Direct Taxes (CBDT) has updated the income computation framework under the presumptive taxation scheme for doctors and certain other professionals. This update is applicable under Section 44ADA of the Income Tax Act, 1961, and is expected to impact a large number of medical professionals across India starting from the Financial Year 2024-25 (Assessment Year 2025-26).

This article covers the detailed explanation of the new scheme, its implications, and what medical professionals must do to stay compliant.

Background: What is Section 44ADA?

Section 44ADA was introduced to provide a simplified tax compliance mechanism for professionals, including doctors, engineers, architects, accountants, and others notified under Section 44AA. It allows eligible professionals to declare 50% of their gross receipts as taxable income and pay taxes accordingly without maintaining detailed books of accounts.

Until now, this was widely used by small and medium-sized medical practitioners, particularly those operating in solo or partnership setups.

Key Updates by CBDT in 2025

1. Prescribed Manner of Income Reporting

The CBDT has now prescribed a standard method for computing income under Section 44ADA. This aims to reduce ambiguity and curb the misuse of the provision by some professionals inflating or suppressing figures.

2. Reporting Requirements Enhanced

Doctors opting for the presumptive scheme will now have to declare their gross professional receipts in more detail, specifying:

• Nature of service (Consultation/Surgery/Other medical services)

• Mode of receipts (Cash/Digital/Bank Transfer)

• Total number of patients treated

• Breakup of fees charged (if multiple services provided)

3. Mandatory Use of PAN-Based Billing

To enhance transparency and reduce tax evasion, CBDT has mandated the use of PAN-based invoicing or UPI-linked billing mechanisms for all receipts exceeding ₹2,000 in a day from a single patient.

4. Applicability Limit Reconfirmed

The scheme continues to be applicable for professionals with gross receipts up to ₹75 lakhs in a financial year. However, the 50% deemed income rule will only apply if not more than 5% of total receipts are in cash.

5. Digital Payment Linkage to AIS

All professional receipts declared under 44ADA will now be auto-populated in the Annual Information Statement (AIS) using digital payment data from banks, UPI platforms, and payment aggregators.

Who is Affected?

The new framework directly impacts:

• Individual practitioners (e.g., General Physicians, Dentists, Surgeons)

• Small Clinics or Polyclinics operated by professionals

• Doctors in partnership firms not opting for audit

Benefits of the Updated Scheme

• Simplified compliance with reduced need for full accounting books

• Better data reconciliation with AIS and PAN-linked payments

• Clarity in income structure for doctors and easier scrutiny handling

• Incentive for going cashless, thereby promoting digitisation in healthcare

Challenges and Considerations

• Doctors must now ensure detailed record-keeping of all patient interactions and income sources

• The threshold for cash receipts (5%) may be hard to comply with in remote or rural clinics

• Professionals must update their billing systems to incorporate PAN/UPI for tracking

Conclusion

The CBDT’s update to the presumptive income scheme for doctors is a welcome move toward greater transparency, reduced compliance burden, and digitization of healthcare transactions. However, it also brings the need for better record-keeping and disciplined financial practices among medical professionals.

Doctors must now proactively align their practices with the new norms under Section 44ADA to ensure smooth compliance and avoid future scrutiny.